A former director of the People’s Bank of China’s (PBOC) Sheng Songcheng says Increased yuan bill sales by China’s central bank in Hong Kong this week helped tighten liquidity in the offshore market to help stabilise the yuan by making it expensive for speculators to short the currency.
Sheng made the observation after the PBOC sold 35 billion yuan ($4.81 billion) worth of bills in Hong Kong on Tuesday, exceeding the 25 billion yuan of the bills coming due this month.
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The PBOC usually conducted a flat rollover by auctioning the same amount of bills as those maturing, and selling a higher amount would reduce yuan liquidity in the market.
Sheng added that if downside pressure on the offshore yuan persists, the PBOC could continue to issue more offshore yuan bills. According to report, China’s major state-owned banks were seen actively mopping up the offshore yuan earlier this week, as the currency was coming under growing depreciation pressure. Standing at 7.2827 per dollar in late trade today, the offshore yuan has lost about 5% against the greenback since the start of the year, making it one of the worst performing Asian currencies.
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